Nuclear Safety Concerns Spur European Power Price Spikes

Mar 15, 2011

Prices on Europe's largest power market spiked violently on Tuesday morning in response to 25 percent of Germany's nuclear capacity coming off line. The decision stems from safety concerns following the series of explosions at Japan's nuclear reactors.

By 12:30 London time, the price of contracts for power delivered in Germany during April, May and June 2011 each posted record gains on Tuesday over Monday's closing price.

April '11 Baseload rose EUR10.05 per megawatthour (MWh) from Monday's close to trade as high as EUR64.25/MWh, May '11 Baseload gained EUR9.50/MWh to trade at EUR64.50/MWh, while June '11 Baseload added EUR7.35/MWh session on session to EUR60.00/MWh.

"These day on day gains are huge, and will impact markets all over Europe," said Zoe Double, editor of European Daily Electricity Markets at ICIS Heren. "Germany is the benchmark for European wholesale power prices, and with connections to other markets getting stronger, the effects of this decision will be seen in wholesale market price rises across the EU."

The EUR10.05/MWh gain session on session is a record for any April contract since ICIS Heren began to assess the German power market in August 1999.

The German Calendar Year 2012 Baseload contract, for power delivered continuously over the next year, has been reported trading as high as EUR58.40/MWh on Tuesday, a rise of EUR2.50/MWh - gaining 4.5% in value in a single session. The contract is the benchmark for European wholesale power prices.

A day on day gain of this size on a calendar year contract has not been seen since October '09, according to ICIS Heren data.

German Chancellor Angela Merkel announced on Tuesday that the seven nuclear reactors in Germany that began operation before 1980 - the 840MW Neckarwestheim 1; 926MW Philippsburg 1; 1,225MW Biblis A; 1,300MW Biblis B; 912MW Isar 1; 1,410MW Unterweser and 806MW Brunsbuettel nuclear reactors - are all to remain offline for the next three months.

The 1,300MW Biblis B and 806MW Brunsbuettel units are already offline for maintenance and in Brunsbuettel's case, extensive repairs. However, this still removes 5.3GW from the market over the next few days - 25 percent of Germany's installed nuclear capacity.